In 2002, Tyco became embroiled in a well-publicized scandal arising out of alleged corporate looting by the company’s top management. In 2005, Tyco’s former CEO, Dennis Kozlowski, and its former CFO, Mark H. Swartz, were convicted of grand larceny and securities fraud and are currently serving prison sentences. Many civil litigations arose out of the Tyco scandal, including a securities class action that settled for nearly $3 billion.
Frank Walsh, a former Tyco director, allegedly received an undisclosed $20 million payment from Tyco in connection with assisting Tyco in its acquisition of CIT Corporation. Walsh pleaded guilty to securities fraud in connection with the unauthorized payment, and has disgorged the $20 million payment and paid a $2.5 million fine.
The Public Employees Retirement Association of Colorado ("PERAC") is one of multiple plaintiffs that have opted out of the securities class action settlement and have separately sued Tyco and certain of Tyco's former officers and directors. The PERAC action includes allegations that Walsh failed to disclose the $20 million payment from Tyco in connection with assisting Tyco in its acquisition of CIT Corporation.
On December 4, 2009, Walsh settled the PERAC action. The details of this settlement have not yet been disclosed, but PERAC has reportedly recovered more than $21 million collectively from its settlements with Tyco, Kozlowski, Schwartz and Walsh.